All About Systematic Investment Plan and Timing the Market

A Systematic Investment Plan (SIP) allows an investor to make disciplined investments without the need to time the market. If continued on a long-term basis, regardless of the short-term fluctuations in the market, SIP will ensure the building of a suitable corpus. 

Also, the fact is SIPs work at their best when markets are volatile due to benefits such as rupee cost averaging, power of compounding, and hassle-free investments. Here’s how an investor can make the most of SIP and generate a respectable corpus over a period.

Start the SIP journey early: It is advised that one must start investing the moment they start earning. This gives a mutual fund SIP considerable scope in terms of time to benefit from the power of compounding. A reasonably longer time horizon ensures better chances of earning higher returns.

Align SIP investment to achieve financial goals: As an investor, one must ensure always that investing in SIP aligns with achieving financial goals. When SIP investment is aligned to a specific financial goal, the chances are less that an individual will redeem it until that goal is achieved, thus making them a disciplined investor in the bargain. 

Remain punctual with SIP: A few investors may try to pre-empt the small market jumps and try to adjust their plans based on this. They either pause, redeem, or start their SIPs abruptly, which may impact the outcomes in the long run. So, when it comes to SIPs, an investor should avoid timing the market.

It is important to note that trying to time the market with SIP usually defeats the overall purpose of starting systematic investments in the first place. 

Typically, SIPs have a dispassionate nature. As a result, an investor is saved from falling into the trap of greed and fear. While eliminating the guesswork, SIPs are known to make an investor disciplined and consistent with their investing plan.